AS/AD 110 In 2024, the U.S. economy is struggling. Unemployment has jumped. Trouble began in January 2023, with a spike in oil prices, generated by terrorist bombing of important production fields in Saudi Arabia. In January 2024, a second blow hits the economy, when households become much more risk averse, as they panic about corporations' high debt levels. The table below provides an incomplete list of macro data. 109 108 107 Note: Inflation expectations are derived from the treasury 10-year TIPS spread. The Government borrows virtually all of its funds by issuing 10-year treasury notes. 106 2022:04 105 2023:04 2024:24 104 $50 4% 2.0% 5% 6% -1.1% 103 4.8% Key values: LTSG = 2.5% U* = 4% T* = 2% oil = 10% of CPI Phillips curve a = 0.5 102 101 Crude oil price ($/bbl) Unemployment Consumer Price Index (CPI), year-on-year, % change CPI: index level CPI, excluding oil, year-on-year, % change Real U.S. output: index level Federal Government spending Federal taxes collected corporate borrowing level Corporate/Government bond spread 10-year Government bond yield 10-year yield minus TIPS yield 100 100 2.00% 100 98 96 $2.0 trillion $2.2 trillion $2.5 trillion $1.7 trillion $1.3 trillion $1.2 trillion $200 billion 2.00% 2.00% 4.00% 2.50% 2.00% 2.50% 2.00% 99 98 97 96 95 95 96 97 98 99 100 101 102 103 101 105 106 107 108 109 110 In the space provided above label the axes and given the data in the tables above, draw all three curves, and identify equilibrium for Q4:2022. Suppose we did not have an oil shock in 2023. Instead, suppose the economy grows at its long term sustainable pace. Using the same space at the top of this page, provide the 2023 AD and AS curves that allow you to depict dynamic equilibrium from Q4:2022 through Q4:2023